Asked by Brandon Watson on Jun 19, 2024
Verified
If a price floor is set above the equilibrium price,
A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.
Price Floor
Price Floor is a government or regulatory-imposed minimum price set above the equilibrium price, preventing the price of a good or service from falling below it.
Equilibrium Price
The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market balance.
Surplus
A situation where the quantity of a product or service supplied exceeds the quantity demanded at the current price.
- Recognize the circumstances in which price limits and minimums are successful or fail.
- Gain insight into the effects of market interventions for both consumers and producers.
Verified Answer
NA
Nakia AdamsJun 20, 2024
Final Answer :
B
Explanation :
When a price floor is set above the equilibrium price, it results in a surplus because the higher price encourages producers to supply more than consumers are willing to buy at that price.
Learning Objectives
- Recognize the circumstances in which price limits and minimums are successful or fail.
- Gain insight into the effects of market interventions for both consumers and producers.